Artemio Baltazar vs. Court of Appeals, G.R. No.

78728 December 8, 1988

Syllabus/Doctrine:

The claim of indefeasibility of the petitioner’s title under the Torrens land title system
would be correct if previous valid title to the same parcel of land did not exist. The
respondent had a valid title (transfer certificate of title No. T-15148 later on changed to
No. T-4768) to the parcel of land (Lot No. 3329) issued to it on 10 January 1936 after
purchasing the parcel of land at public auction sale. It never parted with it; it never
handed or delivered to anyone its owner’s duplicate of the transfer certificate of title; it
could not be charged with negligence in the keeping of its duplicate certificate of title or
with any act which could have brought about the issuance of another certificate upon
which a purchaser in good faith and for value could rely. If the petitioner’s contention as
to indefeasibility of his title should be upheld, then registered owners without the least
fault on their part could be divested of their title and deprived of their property. Such
disastrous results which would shake and destroy the stability of land titles had not been
foreseen by those who had endowed with indefeasibility land titles issued under the
Torrens system. Veronica Bareza perpetrated the fraud by making false representations
in her petition and the title issued to her being the product of fraud could not vest in her
valid and legal title to the parcel of land in litigation. As she had no title to the parcel of
land, in the same way that a thief does not own or have title to the stolen goods, she
could not transmit title which she did not have nor possess. Moreover, the petitioner
cannot claim not to be at fault in the purchase of the parcel of land from his co-
defendant Veronica Bareza, to say it mildly, or he cannot be deemed to be a purchaser
in good faith and for value, because as correctly found by the Court of Appeals he is not
an innocent purchaser.

Facts:

The parcels of land involved in this case belonging to one Lorenzo Molera were on 15
August 1965, acquired therefrom by Good Earth. On 19 May 1967, Transfer Certificate
of Title (TCT) No. 191048 was issued in the name of Good Earth. On 22 March 1977,
Artemio Baltazar instituted Civil Case No. 5552-P against Good Earth for declaration of
ownership and reconveyance of the subject parcels of land. Baltazar traced his claimed
rights from an alleged vast Spanish land grant down to a deed of sale over the subject
lots allegedly executed by one Pedro Asedillo (for whose mother, Baltazar had been a
tenant sharing in the rice harvest from the lots). Failing to serve upon Good Earth the
summons and copy of the complaint, the trial court granted plaintiff Baltazar’s motion to
serve by publication. Subsequently, the trial court, on motion of Baltazar dated 24
October 1977 and upon finding that Good Earth had failed to file its answer within the
sixty (60) day period, declared Good Earth "as if in default" and allowed Baltazar to
present his evidence ex parte. Ten (10) days later, the trial court issued the questioned
judgment by default against Good Earth. Accordingly, TCT No. 191048 in the name of
Good Earth was cancelled and another one, TCT No. 63805, was issued in the name of
Artemio Baltazar, all without the knowledge of Good Earth. Baltazar lost no time at all in
selling the land so titled in his name. The subject land was subdivided and sold to
Aurora Galvez, Rizaliana Garments, Inc. and BGB Development Corporation, each
issued corresponding TCTs. On 9 August 1979, Good Earth instituted a complaint for
annulment of the judgment in Civil Case No. 5552-P and for reconveyance, against
Artemio Baltazar and his vendees Aurora Galvez and BGB Development Corporation.
Good Earth later impleaded Baltazar’s third vendee, Rizaliana Garments, Inc. as an
additional defendant.chanrobGood Earth assailed the judgment of 3 November 1977 as
null and void, upon the ground that the trial court had not acquired jurisdiction over the
person of Good Earth. The trial court rendered judgment against Good Earth, but the
Court of Appeals reversed the same.

Issue:

whether or not Baltazar’s vendees, who according to Baltazar were purchasers in good
faith, had acquired any rights independent of the acts of petitioner Baltazar

Ruling:

No. First, Baltazar’s vendees have not proved their status as purchasers in good faith
and for value of the land which Baltazar had no right to sell. The burden of proving the
status of a purchaser in good faith and for value lies upon him who asserts that status.
In discharging that burden, it is not enough to invoke the ordinary presumption of good
faith, i.e., that everyone is presumed to act in good faith. The good faith that is here
essential is integral with the very status which must be proved. The Court must stress
next that whatever rights Baltazar’s vendees might have had cannot be superior to the
rights of Good Earth, who was at all relevant times lawful registered owner of the
subject parcels of land, and who had not been negligent in any manner and indeed had
not performed any act which gave rise to or any occasion for any claim of right by third
persons. Good Earth was, moreover, itself a purchaser in good faith from the
successors-in-interest of the original title holder, Lorenzo Molera. On appeal in the case
of C.N. Hodges v. Dy Buncio & Co., Inc., the Supreme Court, through Mr. Justice
Sabino Padilla, said:

The claim of indefeasibility of the petitioner’s title under the Torrens land title system
would be correct if previous valid title to the same parcel of land did not exist. The
respondent had a valid title (transfer certificate of title No. T-15148 later on changed to
No. T-4768) to the parcel of land (Lot No. 3329) issued to it on 10 January 1936 after
purchasing the parcel of land at public auction sale. It never parted with it; it never
handed or delivered to anyone its owner’s duplicate of the transfer certificate of title; it
could not be charged with negligence in the keeping of its duplicate certificate of title or
with any act which could have brought about the issuance of another certificate upon
which a purchaser in good faith and for value could rely. If the petitioner’s contention as
to indefeasibility of his title should be upheld, then registered owners without the least
fault on their part could be divested of their title and deprived of their property. Such
disastrous results which would shake and destroy the stability of land titles had not been
foreseen by those who had endowed with indefeasibility land titles issued under the
Torrens system. Veronica Bareza perpetrated the fraud by making false representations
in her petition and the title issued to her being the product of fraud could not vest in her
valid and legal title to the parcel of land in litigation. As she had no title to the parcel of
land, in the same way that a thief does not own or have title to the stolen goods, she
could not transmit title which she did not have nor possess. Moreover, the petitioner
cannot claim not to be at fault in the purchase of the parcel of land from his co-
defendant Veronica Bareza, to say it mildly, or he cannot be deemed to be a purchaser
in good faith and for value, because as correctly found by the Court of Appeals he is not
an innocent purchaser. We might assume for the moment and for purposes of argument
only that Baltazar’s vendees had successfully proven they were purchasers in good
faith and for value. Even so, as between two persons both of whom are in good faith
and both innocent of any negligence, the law must protect and prefer the lawful holder
of registered title over the transferee of a vendor bereft of any transmissible rights.
Under the foregoing principle derived from the above case law, Baltazar’s vendees have
no rights as against Good Earth. Their recourse is against Baltazar himself.